Chewy's Q4 Beat Shows Strength In Pet Market, Says Bullish BofA

Chewy Inc CHWY beat revenue and earnings estimates for the fourth quarter, backed by continued momentum in pet spending, according to BofA Securities.

The Chewy Analyst: Nat Schindler maintained a Buy rating on Chewy with an unchanged $133 price target. 

The Chewy Takeaways: Several signs point to the company’s healthy growth in the longer run, with a 35% year-on-year rise in new pet profiles in 2020 for puppies and kittens, “signaling higher staple consumption of food, hard goods and healthcare services over time,” Schindler said in the note.

Chewy reported fourth-quarter revenue of $2.04 billion, ahead of the Street expectation of $1.96 billion, with 1.4 million net additions.

See also: Compare Pet Insurance

“Gross margin came in at 27.1% (300bps y/y), which was 200bps above Street at 25.1%, with approximately half of the margin improvement driven by higher penetration rates of high margin verticals (private label, hard goods, and healthcare),” the analyst said. 

“We see ’21 net revenue guidance of $8.85bn- $8.95bn as conservative and think that CHWY’s subscription model supports upside,” he added.

CHWY Price Action: Shares of Chewy were surging 7.33% to $86.27 at last check Wednesday.